Helen Thompson: "The Complex History of Energy and Geopolitics" | The Great Simplification #98
What this covers
(Conversation recorded on October 30th, 2023)
Show Summary:
On this episode, political economist Helen Thompson and Nate discuss how energy and geopolitics have interconnected over the past century, building to the entangled political relationships we see around us today. The dynamics of power on a global scale are complex - stemming from access to energy, financial control, military strength, credibility/trust, and much more - yet we can understand these a bit better by learning the history that shaped them. How have geologic provinces of energy dense carbon created inherent hot spots on the geopolitical playing field? How has the global monetary system and debt evolved to strengthen the power of a select few countries and how difficult is it to break from this system? Do our leaders have the capability/knowledge to connect energy and geopolitical policy in order to guide us through a future of declining energy availability?
About Helen Thompson:
Helen Thompson is Professor of Political Economy at Cambridge since 1994. Her current research concentrates on the political economy of energy and the long history of the democratic, economic, and geopolitical disruptions of the twenty-first century. She is a regular panelist on Talking Politics and a columnist for the New Statesman. She is a co-presenter of UnHerd's podcast, These Times and recently published Disorder: Hard Times in the 21st Century.
For Show Notes and More visit: https://www.thegreatsimplification.com/episode/98-helen-thompson
00:00 - Guest highlight 00:24 - Guest introduction 01:52 - How did Helen become interested in her work? 04:37 - Overview of Helen’s new book: Disorder: Hard Times in the 21st Century 07:21 - Is the political science field energy blind? 10:29 - The Suez Crisis and potentiality of a future one 14:38 - The importance of the Suez Canal and the Strait of Hormuz 17:36 - Is there a parallel between the Abraham Accords and Iran potentially feeling less relevant? 21:26 - Could the Middle East countries’ aversion to the West unite them in a conflict? 24:06 - How is energy at the center of this conflict 27:12 - What is the most hopeful outcome of the current situation? 28:30 - Explanation of the complex situation in the Middle East 30:40 - History of U.S. relations with the Middle East 36:36 - Biden’s policy 38:40 - BRICS+ available oil exports 42:36 - Can the rest of the world put sanctions on the U.S. without affecting their own economies? 44:57 - Israel-Hamas situation and energy 50:19 - Teaching 51:00 - How energy allowed Britain and Germany to become key powers in Europe 57:47 - Could there be war in the future fighting for renewable energy? 1:01:10 - Can the Global North and West create agreements with the countries in which important metals reside for renewable energy? 1:06:09 - Is U.S. dollar-denominated debt strong enough to hold geopolitical sway even if the petrodollar is in decline? 1:12:18 - What really underpins the strength, ubiquity, and confidence in the U.S. dollar? 1:14:50 - Was the Ukraine invasion about energy or territorial? How did Crimea fit into this strategy? 1:21:46 - How did Europe become so dependent on Russian oil and natural gas? 1:30:10 - Where does the UK stand in this? 1:32:41 - If Israel evicts the Palestinian populations from Gaza and the West Bank, will Arab governments collectively respond, and what would be the implications? 1:35:14 - How much do end time prophecies around various religious groups play into this situation? 1:36:47 - Will energy insecurity push nations towards green energy? 1:40:32 - Helen’s advice for UK political leaders 1:42:02 - Could the political leaders be educated on energy and the systemic story? 1:44:22 - Self education 1:47:48 - Helen’s advice for listeners 1:49:40 - Helen’s advice for young adults 1:52:16 - Helen’s advice for graduate students 1:55:36 - What Helen cares most about 1:57:49 - Helen’s magic wand
Source description (no synthesized summary yet).
Thompson argues that geopolitical instability in the 21st century stems primarily from structural energy constraints and the vulnerability of critical energy infrastructure, not just from ideological or contingent political conflicts, making energy-aware analysis essential for understanding Middle East, Russia-Ukraine, and great power dynamics.
- Historical patterns show energy access determined which powers rose (Britain via coal, US via oil) and which fell (European empires lacking domestic oil)
- Current Middle East conflicts, Ukraine invasion, and Saudi-Iran relations are substantially driven by oil/gas transit routes, supply dependencies, and export revenues rather than ideology alone
- Western energy blindness since the 1980s-90s has created strategic vulnerabilities: Europe dependent on Russian gas, global markets exposed to Strait of Hormuz disruptions, energy transition creating new metal dependencies with poor geopolitical bargaining position
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When Nasser closed the Strait of Tiran in 1967 (Six Day War) and then closed the Suez Canal for eight years, ships had to go all the way around Africa, creating massive oil cost increases for countries importing through those routes and forcing Britain's withdrawal from the Middle East because it could no longer afford the energy costs of maintaining imperial presence.
“in 1967 when Nasser closed the Strait of Tiran again and then kept Suez Canal closed for eight years the second time. What happened then during those eight years, the ships had to go all the way around? Yeah, if it wasn't coming pipeline, it had to go all the way the way around Africa. And interestingly, in that context, that is part of the reason then why from 1967, the British government concludes it can no longer stay in the Middle East. It can no longer carry on being an imperial power there because suddenly the oil costs that Britain faces in the wake of the Six Day War where it's also subject to embargo, a much greater.”
In the Suez Crisis of 1956, Britain took military action with France and Israel against Egypt because President Nasser nationalized the Suez Canal, but from Britain's perspective, this was justified action to guarantee oil security for Western European countries, as American presidents wanted largely Western Hemisphere oil and were unwilling to provide military support for Middle East energy security—that was Britain's responsibility.
“in 1956 when the British took military action with France and Israel against Egypt in light of Nasser, the Egyptian president nationalizing the company that owned the Suez Canal, in the British mind, government mind, the British were doing exactly what they were supposed to do in the post-second world war world, which was to act as an imperial power in the Middle East to guarantee the oil security of Western European countries because American presidents were very clear in the post-war, second world war world, they wanted largely the oil of the Western Hemisphere for the Western hemisphere, obviously not least the United States itself, they were only willing to provide oil to Western Europe countries in an emergency.”
After the Iranian Revolution in 1979, Iran (which had been Israel's primary oil supplier before the revolution) could no longer sell oil to Israel; Israel then began looking for other options and eventually got a guarantee from the Americans for emergency oil, but today Azerbaijan is Israel's number-one oil exporter, with oil coming via pipeline through Turkey, making Turkey's position a key vulnerability for Israel.
“But then when we get to the aftermath of the Iranian Revolution, although that there's some covert selling of oil by Iran to Israel, this timeline through a land pipeline rather than through the Strait of Tiran, Israel starts looking for other options. It gets a guarantee from the Americans that in an absolute emergency, the Americans will provide oil. But if we look at who is the number one exporter of oil to Israel today, it's Azerbaijan. It comes via pipeline. The vulnerability for Israel in that is actually Turkey's position because the pipeline's coming through Turkey.”
In the 19th century, Britain's economic preeminence came with the Industrial Revolution, and Britain industrialized before any other country because it had abundant domestic coal and had been using coal for heating since at least the 13th century, creating incentive to extract deeper coal, leading to steam engine invention.
“why did Britain industrialize before any other country in the world?' I think that the answer is not only that it had significant or abundant domestic coal, but also, because it'd been using coal actually for a very long time for heating purposes, pretty much, again, unlike anywhere else, going back even the 12th century, certainly by the 13th century, it had incentive to find ways of extracting deeper coal. The first purpose of the steam engine was to do precisely that, to be used in mining, and then the steam engine ran off coal, so it's a circular phenomenon.”
Putin worked systematically from when he came to power to change Russia's energy relationship with Europe by building Nord Stream pipelines under the Baltic Sea and additional pipelines under the Black Sea, wanting to weaken Ukraine by shutting it out of transit and eliminating the risk Ukraine posed to Russia's reliability as energy exporter.
“I think you can say is, is that Putin, relatively early from when he came into power, worked quite systematically to try to change that on terms of European markets. That was really not just what the Nord Stream pipelines under the Baltic Sea were about, but his moves to build more pipelines under the Black Sea. He wanted to be able to weaken Ukraine by shutting it out of Russia's transit system and, indeed, from his point of view, eliminate the risk that Ukraine posed to the reliability of Russia as an energy exporter.”
Germany was advantaged by having abundant coal like Britain, but unlike Britain it didn't have adjacent iron deposits—most iron was in Alsace-Lorraine (held by France), which lacked coal, explaining the Franco-German conflict from 1870 through WWII and the European Coal and Steel Community as a means of giving France access to West German coal.
“If you then look at the German story, Germany is advantaged, like Britain, by having coal, a lot of coal. But unlike Britain, it actually doesn't have iron deposits that are adjacent to the coal. Quite a lot of the iron deposits are in Alsace-Lorraine. France doesn't have coal. Even just saying that like that explains, I think, quite a lot as to why, between 1870 and the creation of Germany, through the Second World War, Alsace-Lorraine is a central part of the conflict between France and Germany. Explains why the European coal and steel community, the first part of the European project, effectively was a means of giving France access to that West German coal.”
In the early 20th century, the two large oil producers were the United States and Russia, and this is not coincidental—they went on to dominate the 20th century geopolitically (Russia as Soviet Union) while European imperial powers were eclipsed, because every other European power except Austria had no domestic oil.
“If you look at the beginning of the 20th century, the two large oil producers are the United States and Russia. I don't think it's a coincidence that they are going to go on, albeit in the case of Russia, in the form of the Soviet Union, to dominate the 20th century geopolitically, to take over the European imperial powers, by contrast, are going to be eclipsed. Britain tries to deal with its oil problem, which it does moderately successfully, by extending its empire round oil, i.e. sphere of influence in Persia, what was Mesopotamia, what will become Iraq in the post-First World War world.”
There is profound resentment in many oil-producing countries among citizens about what looks to them like foreign extractivism with heavy legacy undertones of imperial past, shown by domestic resistance that Western oil companies faced in Iraq and inability to succeed after the age of energy nationalism in the 1970s.
“I do think there is still very profound resentment in a lot of oil-producing countries amongst citizens, about what looks to them like foreign extractivism with heavy legacy, heavy undertones still of the imperial past. I think if you say, 'Why was it not possible for the international oil companies that got those contracts from the Iraqi government, the Western ones, essentially to stay there and do well and turn Iraq into the kind of large-scale oil producer that the Bush administration had in mind?' And partly it is because of the domestic resistance that they ran into in Iraq, the political situation. Now, partly that's to do with ISIS, but it was also to do with direct attacks on the headquarters of oil companies from angry Iraqi citizens.”
In spring 2020 (pandemic start), Saudi-Russian cooperation looked fragile when bin Salman tried to flood the oil market after failing to reach agreement with Putin, but Trump put OPEC+ back together by threatening military withdrawal unless Saudis cooperated, and OPEC+ has remained cohesive since.
“If you go to the spring of 2020, so when the pandemic's really started, you have bin Salman trying to flood the market with oil after you can't reach an agreement with Putin about how to deal with the pandemic, and then you effectively have Donald Trump putting OPEC+ back together again, because he doesn't want the price of oil on the floor for American shale producers, and having to threaten the Saudis with military withdrawal, or less military support, unless they play nice with him about that.”
Now Germany is dependent on Middle Eastern LNG and sources globally; but the Middle East is in crisis too, adding further risk to future energy imports for Europe.
“But now that's ancient history. Now, they're dependent on Middle Eastern, LNG, and stuff from all over the world. But now, the Middle East is in crisis, too. That adds further risk to future energy imports for Europe.”
Russia can decouple from the West without disastrous economic effects on itself because it has been able to inflict substantial harm on European countries (especially Germany) by cutting off gas through Nord Stream 1, with Germany experiencing major industrial blow while Russian economy hasn't taken proportional hit.
“I think you can see that, in Russia's case, that it has been able to inflict quite substantial harm on European countries, and in particular Germany, by cutting off the supply of gas through the Nord Stream 1 pipeline, which [inaudible 00:43:24] began to do from the summer of 2022. If you look at the economic data coming out of Germany over the last few months, it's pretty difficult, but Germany has experienced a major industrial blow by what has happened. And it's not clear that the Russian economy has taken such a big hit for having done this.”
By around 2011, the Obama administration bought the idea that shale was 'the fix,' believing shale would solve American energy dependence on the Middle East, which led to the decision to sanction Iran, believing they could afford to do so without oil prices spiking.
“I think by the time that Obama's been in office a couple of years, by 2011 probably, the people in the White House with him buy this idea that shale is the fix. No. Shale is a partial fix. It stops, I think economically, the 2010s being a lot more difficult than they would otherwise have been, but it isn't actually a route out of the United States from the Middle East altogether.”
The United States' geopolitical strength in the mid-20th century came from dominance in energy markets; after conventional US oil peak in 1970 and Nixon eliminating gold standard, much of US geopolitical power came from expansion of dollar-denominated debt in developing nations combined with petrodollar to support the world's largest military.
“A large part of the United States' geopolitical strength in the mid-20th century came from dominance in energy markets. Then, we had the conventional peak of US crude in 1970, followed by Nixon eliminating the gold standard. From that period on, much of the US's geopolitical power has come from a huge expansion of dollar-denominated debt, predominantly in developing nations in combination with the petrodollar to support the largest military in the world.”
Germany created a synthetic fuel program in the Weimar period to create artificial oil from coal (Fischer-Tropsch process), which Hitler expanded but was insufficient for war of conquest.
“the Germans begin in the Weimar period on a program of creating synthetic fuel, which is essentially to create an artificial version of oil from coal. Fischer-Tropsch. Yeah. Hitler expands that program. But there is no way that the Nazis under Hitler can engage in war of conquest without much more oil supply than they actually have.”
The early Cold War period (1945-1960s) was an aberration in German-Russian energy relations when West Germany didn't buy Soviet oil, following US pressure; this ended when the Johnson administration removed the taboo on Soviet oil purchases.
“the periods of aberration, until what's happened in the last year, were the period when Hitler went from the Nazi-Soviet Pact to outright conquest and then the period between, well, the first 15 years or so of the Cold War when West Germany wasn't buying oil from the Soviet Union... the Johnson administration in the United States, then I think West Germany went back to what is the more geographically obvious thing for it to do, which is to have an energy relationship with what was then the Soviet Union.”
The British had currency privilege too for a while in the 1960s through North Sea oil period, but faced a buying-oil-in-dollars problem in the 1970s; the French described dollar strength after Volcker Shock as the 'third oil price shock'.
“The British had it for a while. Got them, in a way, through the '60s. But in the '70s, they were into... Well, until the North Sea oil started. But they end up with a buying-oil-in-dollar problem. Indeed, just on that, I mean, the French in the 1980s described the strength of the dollar after the Volcker Shock as the third oil price shock.”
British naval power in the 19th century was developed through steam-powered ships that were much more powerful than sail-based navies, and this power allowed Britain to open Imperial China through the First Opium War, which Thompson considers significant in world history.
“If you then look at the way in which British naval power developed in the 19th century, and you look at something that I think is pretty significant in world history, which is the... And I say world history very deliberately, is the First Opium War and the opening up of Imperial China, it's British steamships that now are able to be much more powerful than any sail-based navy could be.”
Germany lost the contest for oil in World War I, ending up with nothing in the Middle East and failing to take Baku (the center of Soviet oil industry), which explains Germany's desperate situation in WWII.
“Germany loses desperately in that contest, in the First World War. It ends up with nothing in the Middle East. It tries to take Baku, which is the basis of the now Soviet oil industry, and fails.”
Russia has been able to sell roughly the same amount of oil at lower prices than market price for a reasonable period and has increased liquid natural gas exports, which don't yet compensate for Nord Stream losses but could be expanded further.
“Certainly where oil's concerned, it's been able to sell pretty much the same amount of oil as it was previously doing, for a reasonably long period of time at a lower price than the market price, but even that's not clear that that's true any longer. It's been able to increase its liquid natural gas exports. It obviously doesn't yet compensate from those for what it's lost through selling through the pipelines, the Yamal pipeline and the Nord Stream 1 pipeline to European countries, but it's got the capacity to increase LNG exports further.”
Indian diplomats and ministers are saying European hypocrisy on coal was exposed clearly, and India is not interested in listening to European climate demands, as evidenced by India bursting through all-time coal production records.
“I think you can hear quite a number of Indian diplomats or Indian ministers say things that make pretty clear, 'Well, your hypocrisy was exposed really very, very clearly. We're not really interested in listening to what you've got to say.' Right now, as we speak, India is bursting through all-time coal production in that nation and the world, for that matter.”
Germany experienced demand destruction in the industrial sector during last winter (post-Ukraine invasion) to get through gas shortage, suggesting that European countries got through by reducing gas consumption through industrial shutdowns rather than through policy or supply management.
“You can see all kinds of industrial production that was heavily gas-dependent close down during the course of last winter. That's one of the reasons why European countries got through last winter without more problems where gas supply was concerned because there was demand destruction in the industrial sector, particularly in Germany.”
The Netanyahu government treated Hamas as a quasi-partner for isolating Gaza, relying on technology (wall, Iron Dome) to deal with security threats, but this strategy has collapsed and Israel now faces a colossal problem requiring some solution.
“Because the status quo, any version of the status quo, the previous status before the 7th of October, is completely gone. They basically, under Netanyahu, treated Hamas as a quasi partner, even I would go as far as saying, for isolating the Gaza problem from Israel and then relying on the technology of the wall and the Iron Dome to deal with any potential security threat from Hamas. So let Hamas rule Gaza, let it be the case that because they're Hamas, we can't engage with a question about a Palestinian state. We defend ourselves with technology and it's all come crashing like down around them.”
Ukrainian shale gas was hyped in the 2010s as potentially equivalent to US shale, but by the time of Crimea annexation it was already clear that Polish shale didn't fracture the same way, and Ukrainian shale may have always been a dead end.
“the area, or part of the area anyway, where there were some prospects of Ukrainian shale, though I should say, shale gas that is, that even by the time that the annexation of Crimea had happened, it was already clear that the shale in Poland, which had been particularly hyped up as possibly the equivalent to the United States, turned out not to be like that. The rocks didn't fracture in the same way. It may be that Ukrainian shale was always a dead end, but he brought that to an end by the moves in 2014.”
Something like half to two-thirds of the world's oil reserves are located within 800 miles of Israel, making energy a central driver of the current Israel-Hamas conflict and its potential to escalate into regional war.
“Something like half to two thirds of the world's oil reserves are within 800 miles of Israel. But how has this conflict, taking a bird's eye view, especially during the late 20th century, how is the energy at the center of this current conflict?”
In summer 2019, Iran attacked shipping in the Persian Gulf and Saudi oil facilities after Trump applied 'maximum economic pressure' following his withdrawal from the Iran nuclear deal; the Saudi air defense system failed and even the Trump administration didn't make a serious response, making the Saudis incredibly angry.
“there we saw what happened when Iran responded to what Trump called, the maximum economic pressure being applied after Trump had ended the Iran nuclear deal with various attacks on shipping in the Persian Gulf. Then there was the attacks probably by Iranian proxies on the Saudi oil facilities. Saudi air defense system essentially failed. And then it looked like the Americans, even under Trump, weren't going to make any response to that, which made the Saudis incredibly angry.”
Russia's invasion of Ukraine was not primarily about energy, based on analysis of Ukrainian shale resources and geopolitical factors, despite energy being central to Russia-Ukraine historical relations through pipelines.
“I think that you can't begin to understand relations between Russia and post-independence Ukraine, so going back to December of 1991, without making energy quite central to that... But I struggled to see, really, an energy motive for what happened last year. I think that's much more about a basic rejection of Ukraine as an independent nation-state and some concern about the growth of NATO power around the Black Sea.”
European countries are going back to trying to cultivate private sector investment backed by state support in parts of the world they once colonized, where people have long memories about Europeans and resource extraction, creating a fundamental obstacle to mining agreements.
“Then, for the European countries... They're going back to try and cultivate private sector investment backed-by-state support, often in parts of the world that they once colonized, where people have got long memories about Europeans and resource extraction in those countries. I think you can see that in what was happening in West Africa just over the course of the summer. Niger, in particular, where France had been getting a quarter of its uranium from... There was a coup. The language of this is partly bound up, I think, with a certain kind of resource nationalism.”
The dollar has many problems, but it's better than all the alternatives, which creates path dependence and makes dedollarization difficult despite incentives to do so.
“There might be a desire to get off of the dollar as the world's reserve currency and the way that countries have to buy oil, but the mechanics of doing that... I mean, the dollar has lots of problems, but it's better than all the alternatives.”
Saudi Arabia is more constrained than Russia in decoupling from the West because it's more financially integrated into the US financial system than Russia was pre-2014, and it has military relationships with the US that act as constraints on what Saudis can do.
“I think the Saudi question is more difficult, because the Saudis are obviously more integrated financially into the US world, in the way that the Russians were, much less so even just since 2014, and certainly since those financial sanctions. And Saudi obviously does have a military relationship with the United States, and so that acts as some kind of constraint on what the Saudis can do too.”
European countries including Britain went back to keeping coal-fired power stations open after the Ukraine invasion despite Glasgow climate summit commits to phase out coal by 2045, showing that in emergencies coal is the energy source of last resort, which undermines European credibility on climate.
“everything that happened last year in terms of Russia's invasion of Ukraine and the European reaction to that, which was, when there was a difficulty, European countries, including Britain, which was hardly the most exposed where Russian gas was concerned, went back to keeping coal-fired power stations that were due to close open. They did this, in the British case, just months after they'd been caught at Glasgow lecturing the Chinese and the Indians and the Indonesians about how they had to make commitments to phase out coal by 2045.”
President Bush's Iraq War had a crucial purpose of removing sanctions from Iraq's oil exports, rebuilding the Iraqi oil industry, getting international oil companies back into Iraq, and turning Iraq into a large-scale oil producer (like 10-11 million barrels/day like the Saudis) rather than just medium-sized; but by 2005 it was clear this wasn't going to work.
“Let's say particularly by 2005, so once it's clear that Iraq is going to be a quagmire at best, and that if a crucial purpose, which to my mind it was, of the Iraq War was to remove the sanctions from Iraq's oil exports, rebuild the Iraqi oil industry, get international oil companies back into Iraq, turn Iraq into a large-scale oil producer rather than, as it had previously been before the sanctions, a medium-sized oil producer, so be producing more like 10, 11 million barrels a day, like the Saudis could, that wasn't going to work out. It's very clear by 2005.”
If oil is the master resource, and homo sapiens have historically gone to war over resource and geographical limits, the question arises whether fighting kinetic war on renewable energy would work the same way or have different geopolitics.
“This is going to sound like a obtuse question, but if oil is the master resource, and what you said, Hitler was obsessed with oil, and homo sapiens historically have gone to war when there are resource or geographical limits, could you imagine fighting a kinetic war on renewable energy?”
Biden's Iran policy didn't work: by summer 2021 he had to ask Saudis to increase output, which they weren't willing to do, and he made a humiliating visit to Riyadh in summer 2022, with Saudis showing no willingness to accommodate Biden's desire for more OPEC+ oil output despite working together on Abraham Accords.
“But what we know, whatever thinking was going on, the policy didn't work. And so already by the summer of 2021, he was having to ask the Saudis essentially to increase output, which they weren't willing to do. He then made his rather humiliating visit to Riyadh in the next summer, in 2022. And the Saudis have shown no willingness really, despite the fact of working with the administration about the Abraham Accords, to accommodate the Biden administration's persistent desire for more oil output from OPEC+.”
The geopolitics of renewable energy and metals required for low-carbon energy will differ from oil and gas because metals can be recycled and technological innovation can find alternatives, whereas oil and gas are extracted once and burned—a fundamental difference.
“Now, energy, as we both know, Nate, isn't like that. You extract oil or gas, and you get to use it once, and I think that that is quite a fundamental difference between where we might be going geopolitically with... Now, that isn't to say that I'm somebody who is really gung-ho optimistic about the energy transition. But I'm not, at least yet, convinced that the geopolitics of metals has to be quite as dangerous and fraught as the geopolitics of oil and gas, and particularly oil, were in the 20th century.”
The way the international banking system works is the most important thing about the dollar's position now, more than productivity, energy independence, or military power; the US has been able to use other countries' companies' access to the American banking system to make foreign policy work.
“I think that this is a quite hard question to unpack all the different ways in which dollar strength works. But my instinct is that actually it's the way the international banking system works that's actually the most important thing now about the dollar's position. I think you can see that in the ways in which the United States has, under the last few presidents, pretty much all of them, been able to use other countries' companies' access to the American backing system to basically make various bits of foreign policy work.”
Germany became dependent on Russian oil and natural gas because, in the age of oil, Russia is the most obvious oil relationship for Germany geographically, with three major blocks being the Americas, the Middle East, and Russia.
“I mean, I think the answer, from Germany's point of view, which I think is the crucial European country where this Russian energy relationship is concerned that... That, in the age of oil, that Russia, whether it was Russia, whether it was the Soviet Union, whether it's back to Russia again, is the most obvious oil relationship for Germany to have. If you think of it as there being three big blocks, the Americas, the Middle East, and Russia, just geography alone would align Germany in Russia's direction.”
Thompson's book Disorder argues that the political shocks of the 2010s (Brexit, Trump election) had structural explanations rooted in energy history rather than being mere episodes of political psychodrama, and that understanding these events through an energy lens explains them in ways conventional accounts cannot.
“What I really wanted to do in Disorder was try to explain the political shocks of the 2000 and tens with which people obviously were very familiar, not at least in Britain and the United States because high on the list of shocks of that year were obviously Brexit or seemed to be anyway, Brexit and the election of Donald Trump, and to give them a long history. And I didn't think that they were just episodes, if you like, of psychodrama in British politics or American politics. I thought that each of those two things had more of a structural explanation than that.”
The Israel-Hamas situation is creating a 'George Floyd moment' in international politics where zeitgeist shifts are changing social contracts around supply chains, geopolitical alliances, and agreements that were assumed to continue before October 2023.
“it almost feels like this entire situation, unexpectedly to me and many people, is like a Middle East version of a George Floyd moment, where there are people around the world reacting to what's happening, and it seems like that puts the international social contract of agreements and supply chains and geopolitical alliances and everything that we kind of assumed would continue before October 2023 might change, just because of this zeitgeist is changing.”
Political science is largely energy blind, though political economy has a more complicated relationship to energy; political economy was energy aware in the 1970s but lost that awareness in the late 1980s or 1990s at the same time Western politicians lost awareness of energy's importance.
“I'd say that political science is energy blind, largely. I'd say that political economy has a more complicated relationship to this. I think if you go back to the 1970s and the political economy that came out of the 1970s, indeed, some of the stuff that say I was taught as an undergraduate, I don't think it was energy blind.”
Shale is a partial fix, not a complete solution: it stops the 2010s from being more difficult economically than they would have been, but doesn't actually create a route out of Middle East oil dependence because of refinery constraints and continued need for oil imports.
“Shale is a partial fix. It stops, I think economically, the 2010s being a lot more difficult than they would otherwise have been, but it isn't actually a route out of the United States from the Middle East altogether, not least because there's the question of where the shale oil is going to be refined, and whether the American refineries are themselves well suited to all the shale that's being produced. So, the United States isn't actually losing its need to import oil from the Middle East. It's simply reducing its need to import oil from the Middle East.”
One possible explanation is that Biden administration might understand there's a medium- to long-term oil problem and keeps some American production back while letting others take the strain, a 'drain America first' strategy.
“You might also say that it's quite useful if you really understand that might be a medium to long-term oil problem, that actually you keep some American production back and let others take the strain.”
OPEC+ is more important than BRICS for understanding energy power blocs, because among BRICS nations, India, China, and Brazil are in very different positions from Russia, and China has severe foreign oil/gas dependency constraints; OPEC+ (particularly the Saudi-Russian axis) is the relevant energy power bloc.
“I mean, on the first question, I think that OPEC+ matters a lot more than the BRICS. I mean, I think if you look at it in energy terms that India and China and Brazil, as the founders, are in a very different position than Russia. And I think that China has its own really quite severe still constraints around its foreign oil and gas dependency, and I think it's well aware of those. I think in this case, the Chinese leadership really is energy aware. So, I think that in terms of, is there a power bloc that would use energy as a weapon against Western countries, we should think in terms of OPEC+ and not think in terms of BRICS.”
Thompson is not yet convinced that the geopolitics of metals will be as dangerous as oil/gas geopolitics in the 20th century, but is cautious about this optimism given the need for massive metal scale-up.
“I'm not, at least yet, convinced that the geopolitics of metals has to be quite as dangerous and fraught as the geopolitics of oil and gas, and particularly oil, were in the 20th century.”
Large oil importers, starting with China, would like nothing more than to be able to buy oil and gas imports without using dollars, because China has enough foreign oil-gas dependency problems without dealing with the need to pay in dollars, but it's not clear this is an attractive proposition to sellers, especially Saudi Arabia, which became deeply integrated into the dollar system.
“I think there's absolutely no doubt whatsoever that some of the large oil importers, obviously starting with China, would like nothing more than to be able to be done with the dollar when it comes to buying oil imports and gas imports, for that matter, too. I mean, China has enough problems that's generated by its foreign and oil-gas dependency without having to deal with the need to pay for this in dollars on top of all else. But I think it's not so clear yet that that's really a very attractive proposition to the sellers and, certainly, where Saudi Arabia is concerned because Saudi Arabia became deeply integrated itself into that dollar world, the post-gold dollar world, let's call it that, that emerged in the 1970s.”
Since 2008 (really since August 2007 financial crash), the position of the US Federal Reserve and the US dollar in credit markets has become significantly more important, and China is much more vulnerable to Fed monetary policy and Eurodollar system crises because it's more involved in the system now than pre-2008.
“I think then what has happened since 2008, or really actually since 2007, since the first bit of the financial crash in August of 2007, is that in terms of dollar credit, the position of the United States and the Federal Reserve in particular... They've become significantly more important since then, even than they were before, and that China is much more vulnerable to the Fed's monetary decision-making, to crisis of confidence in the Eurodollar system than it was pre-2008 because it was less involved in it.”
The willingness to use banking sanctions as a weapon incentivizes resistance to dollar system; European countries tried hard to find ways to make financial transactions with Iran after 2018 but found it pretty much impossible to do so.
“Now, again, the willingness to use that weapon incentivizes resistance to it. Because who wants to be constrained by American foreign policy if they can not be? As I understand it anyway, the European countries tried quite hard to find ways of still being able to make financial transactions with Iran after 2018 and found it really pretty much impossible to do so.”
If Biden's goal is more Iranian oil on markets to manage oil policy, this is contradictory because more Iranian oil means more fossil carbon being burned from a CO2 perspective, which undermines the climate positioning.
“But in that case, you just made the supposition that Biden cares more about appearing to be a climate president rather than actually being one, because he wants the US to use less oil, but if more Iranian oil is on the world market, from a CO2 perspective, that's more fossil carbon being burned, right?”
Western countries are creating impossible conditions for developing nations by saying: 'We're going to do energy transition, but we're keeping fossil fuels as insurance policy while demanding you abandon them immediately; plus we're conditioning investments in your metal supply chains on you not building oil/gas pipelines or coal plants'—this hypocrisy won't work.
“it's just actually everybody, Western countries, are saying, 'Look, we're going to do the energy transition. Well, we've got to keep our fossil fuel energy system going. We're going to use that basically as our insurance policy. But you can't do that. You've got to jump straight into this energy future that we don't really trust is quite coming. We're going to make it a condition of us doing things that might help you with the energy transition and facilitate our investments in your metal supply chains with conditional demands that you don't build new pipelines, say oil pipelines or gas pipelines, or you don't build new coal-fired power stations.'... It's not going to work at all.”
Thompson identifies a conceptual failure in the Netanyahu government: inability to see Hamas's fundamentally millenarian tendency (belief that end times justify destruction to bring new world about), turning a blind eye to this aspect of Hamas.
“I think that one of the conceptual failures, let's call it that, of the way in which the Israeli government under Netanyahu dealt with Hamas, was an inability to see its fundamentally millenarian tendencies. Millenarian, what is that? Meaning the end times justify any kind of destruction in order to bring the new world about. And I think that they didn't understand that aspect. They turned a blind eye to that aspect of Hamas.”
Britain announced a new naval base in Bahrain in 2015 and has cultivated relations with UAE as important investor in the UK, showing Britain's return to Middle East presence.
“2015 announced there'd be a new naval base in Bahrain, clearly cultivating relations with the United Arab Emirates, which is an important investor in the UK. I think there was actually another agreement with the United Arab Emirates just a couple of weeks ago, a new investment agreement tied to energy transition, too.”
Putin may have misread signals about German willingness to abandon Nord Stream 2, believing that after Germany fought American pressure for years and finally secured the pipeline, Germany wouldn't give it up even during war.
“I can see that Putin could have thought the Germans aren't going to give up on this, just at the point when they've secured what they've spent a lot of political credibility on. But I think he just misjudged really quite profoundly how difficult it would be for a German government to legitimate the energy relationship with Russia in the context of all-out war against Ukraine.”
The current Middle East situation involves complex overlapping conflicts across multiple countries and groups (Lebanon, Syria, Russia, Iran, Hezbollah, Hamas, Houthis) creating many small Archduke Ferdinand-type possibilities where minor escalations could trigger wider conflict.
“there's a conflict between a country and another country. But here it's like this complicated rat's nest of multiple countries and multiple groups and demographics and initiatives. There's Lebanon, there's Syria, there's Russian support there, there's Iran, there's Hezbollah, there's Hamas, there's all kinds of Houthi rebels, and it seems like there are tiny little Archduke Ferdinand possibilities everywhere.”
If Qatar were to embargo LNG sales to European countries in response to Middle East conflict, it would be a cataclysmic event for the world economy and for Europe.
“Well, if that were to happen, I mean, that would be a cataclysmic event for the world economy and for Europe.”
Unlike the 1970s when the US was on a trajectory to becoming the largest oil importer in the world, the US is now a not-insignificant exporter of oil and can release more oil from the Strategic Petroleum Reserve (180 million barrels released in context of Russia's invasion of Ukraine), giving it more flexibility in Middle East policy than it had in the 1970s.
“Instead of being an exporter, the United States was on a trajectory in the 1970s to becoming the largest oil importer in the world. And so, I think that the immediate crunch points around the energy situation are nowhere near as difficult as they were in the '70s... the United States, as well as being a now not insignificant exporter of oil, has got the capacity to release more oil from the Strategic Petroleum Reserve, 180 million barrels released really in the context of Russia's invasion of Ukraine.”
If Israel pursues expulsion of Palestinian populations from Gaza and the West Bank, Arab governments would have to respond, but the fact that Israel needs to find a way to deal with Gaza post-military action means it can't alienate Arab states.
“I think that Arab governments would have to respond to that, but I think that that very fact, and the fact that the Israelis need to find a way of dealing with, or they have to have some kind of plan for what happens in Gaza once the military action is over. Meaning that they can't alienate Arab states like that and cause them that kind of difficulty.”
As geopolitical tension increases across major power nodes (China, Russia, US), energy insecurity for many nations will become increasingly politically important, raising the question of whether this will push nations toward green energy or toward coal use, with Europe having experienced preview of lower energy lifestyle from last year's restrictions.
“with everything going on, China, Russia, the US, debt, Hamas, Israel, energy depletion, we haven't talked much about climate change, but as geopolitical tension increases across these different power nodes globally, I think energy insecurity for a number of nations will increasingly be politically very important. Do you think that this is going to push nations towards green energy aspirations, in contrast to a resurgence of coal use? Or maybe we're going to have to learn to cope with a lower energy lifestyle, which we've seen some previews with last year in Europe.”
OPEC+ deliberately chose to inflict harm on the Biden administration by announcing a substantial oil production cut in the weeks before the midterm elections last November, despite Biden pressing for increased output.
“OPEC+ can choose to inflict harm on the Biden administration, and I think chose to do so in the run-up to those midterm elections last November, when a quite substantial cut was announced just in the weeks before, when Biden had been pressing, obviously, for increased output.”
What underpins the strength and ubiquity and confidence in the US dollar is uncertain—could be productivity and economy size, US energy independence, or primarily military power; but if it's military power and the US is printing dollars and going further into debt paying for military, there's an unraveling where how the system was put together.
“what really underpins the strength and ubiquity, and confidence in the US dollar? Is it the productivity and the size of the economy, or that we're 90 plus percent energy independent? Or is it really the military? If it's the military, we're printing more dollars and going further into debt, a trillion dollars every couple of months to pay for the military and everything else. There's this unraveling there of how it was all put together.”
There are so many contingencies on the geopolitical side that can derail what seemed to be passive development at any one time, but the system is simultaneously both systemic and vulnerable to contingent events.
“There are so many contingencies, particularly actually on the geopolitical side that can derail what seemed to be passive development at any one time. And it is strange, and this is why I think it's hard to think about because on the one hand it is systemic, but on the other hand, it is vulnerable to contingent events.”
A benign outcome of the current Middle East situation would be that the American Navy's presence in the Mediterranean is sufficient deterrent to Iran to ensure Hezbollah doesn't take significant military action in Northern Israel, with Iran understanding there would be direct consequences for itself.
“I think the benign version is that the presence of the American Navy in the way in which it is now in the Mediterranean is sufficient deterrent to Iran to ensure that Hezbollah stays out of doing anything particularly significant in Northern Israel. And Iran understands that there would be very direct consequences for it, if it were to engage in even maybe even the kind of action that it engaged in the summer of 2019 in the Strait of Hormuz.”
The Tamar gas field, one of Israel's three main Eastern Mediterranean fields, is in the rocket range of Hamas, and production is now shut down, which means Egypt isn't getting liquid natural gas exports from Israel that it would usually do; Egypt also exports less because of reduced supplies, meaning less LNG exports to Europe where demand is higher due to Russia's war in Ukraine.
“one of the fields, the three main fields in the Eastern Mediterranean that belong to Israel, Tamar is in the rocket range of Hamas. And production is shut down at the moment, which means that Egypt isn't getting the liquid natural gas exports from Israel that it would usually do. It also exports itself because it has fields in the Eastern Mediterranean. That means you'll be exporting less to Europe. And we know that European demand for liquid natural gas is much higher than it was two years ago because of the Russia's war against Ukraine.”
The Biden administration will come under considerable pressure from domestic politics around the Israel-Hamas conflict, and with the 2024 election coming, this pressure will intensify regarding how far they can go supporting Israel without causing themselves political problems, with the energy situation not yet being particularly worrying since markets haven't seen serious crisis like immediately after Russia's Ukraine invasion.
“the Biden administration, just because the US is much more important as a power than the European states are, though they face some of the same domestic political issues around this, they're going to come under considerable pressure. And obviously in the case of the United States, with an election next year, that is going to intensify that pressure of how far they can go in supporting Israel without causing themselves very considerable political problems. I mean, I think that it is, though, aided by the fact that the energy situation thus far is not particularly... I wouldn't say it's not particularly worrying, because I think it is worrying. But we're not seeing a serious crisis in the energy markets, in a way in which we did pretty much immediately on Russia's invasion of Ukraine.”
Trump came in with the opposite approach to Obama: taking the position that the US needed to stay close to the Saudis and be tough on Iran, willing to be tolerant of most things related to MBS and cultivating a personal relationship, likely getting personal corporate material benefits.
“Now, Trump, I think, then comes in the exact opposite way of... Well, I use Trump as a shorthand, because who knows who exactly was making all the decisions in the Trump White House, but... Comes in, and he is like, 'No, we need to be close to the Saudis still. We need to be tough on Iran.' And so he's willing to be quite tolerant of most things to do with MBS, cultivates a personal relationship, probably gets some payoff in terms of his own corporate material family interests.”
In the current Middle East situation, there is a paradox: the Abraham Accords seemed to be extending normalization to Saudi Arabia (indicating Israel was becoming integrated economically with Arab states through gas exports and energy partnerships), but simultaneously Saudi Arabia was engaging in diplomatic reproachment with Iran brokered by China, meaning both Israel's integration and Iran's possible marginalization could be happening at the same time.
“I think there's a paradox, which I don't still think I really have got to grits with in trying to understand the events of the last few weeks. Because if we think about the course of the last few years, and particularly actually the first part of this year, we could see two different things, at least two different things, really opposite things going on. The first of them, as you said Nate, was the possibility, the strong possibility it would seem that the Abraham Accords were going to be extended to Saudi Arabia... And at that point you could see that actually not only was Israel going to be able to normalize relations with a growing number of Arab states, including now the most significant one, but that was quite complimentary to various of the economic relations, including energy relations that Israel was cultivating with Arab states.”
Three weeks after the October 2023 Hamas-Israel explosion, oil prices were at similar levels as before the conflict, possibly because the US Navy is suppressing volatility, which surprised the observer who expected premium on long-dated oil futures and financial system instability.
“I thought that the implications would be a premium on long-dated oil futures and instability to the financial system. And instead, oil as of today, three weeks later, is about at the same level it was before that happened, maybe because you say the US Navy is suppressing volatility.”
Qatar and Iran share gas interests in what is essentially one large gas field with a Qatar side and an Iranian side, making them natural partners despite geopolitical tensions.
“Those two countries have massive amounts of natural gas... It's because they're basically... It's one big gas field with a Qatar side and an Iranian- Got it. ...side to it.”
Helen Thompson became seriously interested in energy around 2013, initially approaching it through the relationship between the post-2008 monetary environment—quantitative easing and zero interest rates—and the shale boom in the US, recognizing that the world economy needed shale oil.
“I basically got seriously interested in energy in I think 2013. And I came at it via really the monetary environment of the post 2008 world. And I was sufficiently... aware of the macroeconomic implications of energy to understand that there was a relationship between the post 2008 monetary environment, quantitative easing, zero interest rates and the shale boom in the US.”
In January 2020, just as the pandemic was starting in China, Trump ordered the assassination of Soleimani, head of the Iranian Revolutionary Guard, with the response from many credits being 'he's so mad, he's about to start World War III,' demonstrating the potential for Persian Gulf conflict to become incredibly destabilizing.
“And then in January of 2020, just as the pandemic was starting in China, we had Trump ordering the assassination of Soleimani, the head of the Iranian Revolutionary Guard. And the response of a lot of Trump's credits to that was, 'He's so mad, he's just about to start World War III.'”
ISIS arrived during Obama's tenure, forcing him to put American troops back into Iraq in 2014 after withdrawing in 2012, undermining the narrative that the US could disengage from the Middle East.
“And obviously it doesn't turn out like that in terms of getting out of the Middle East, not least because ISIS comes along, and then he's got American troops out of Iraq by 2012, but the Air Force is going back in in 2014.”
Thompson, born in 1967 in Britain, has visceral childhood memory of the 1974 winter energy crisis—sitting in candlelit homes while her mother tried to cook in the dark—which gave her a profound understanding that energy could have major impacts on daily life.
“I'm a child of the seventies. I was born in 1967 in Britain. My first memory of national life in Britain is the winter of 1974, sitting around at home, seven years old, my mother trying to cook in the dark, evening after evening with her two small children, candlelight. I understood in a quite visceral sense in a way that energy had a profound impact or could have a profound impact on daily life.”
Thompson is very interested in religious questions but doesn't know how to assess whether end-time prophecies about temple rebuilding and Christ's return play into current Middle East situation.
“I actually am very interested in religious questions, but I don't even begin to know how to answer that question.”